Endowed Funds Information
The Utah State University Endowment Fund consists of endowed gifts which provide perpetual financial support for scholarships, fellowships, faculty chairs and professorships, and other important University programs and services. An endowed gift is intended to provide the University with a permanent source of funding by investing the principal amount of the gift and making available a portion of the income it generates. The minimum gift required to establish an endowment is $25,000. The amount of endowment “income” available for spending is determined by the Utah State University Board of Trustees and is governed by Utah law.
Nearly all endowment is collectively invested as a large, singular pool of funds, called the Endowment Pool (the “Pool”). Although the Pool is invested as a singular fund, the individual endowment fund comprising it are separately tracked by assigning each fund shares of ownership in the Pool, similar to how an individual’s investment in a mutual fund is tracked.
The investment objectives for USU endowment funds are long-term in nature. The Endowment Pool is a balanced portfolio of funds designed to produce long-term growth with reduced volatility. The strategy for endowment management includes investing in a broad range of financial instruments. It is the desire of the University to continue to grow the size of the endowment over time and to produce a stable and predictable payout stream.
Endowed Investment and Spending Policies
The University's spending policy is to distribute, annually, 4% of the three-year average fair market value of the endowment. These funds are taken from the earnings. In years when the investment does not earn 4%, the transfer for spending can come from appreciation. In addition to the 4% that is transferred for spending, the university currently retains 1.5% of the value of the endowment to fund administration and to reinvest in advancement to grow the endowment through new gifts.
The spending policy benefits both the donor and the University by protecting the core growth of the endowment. This protects the distributable income. Therefore, the University ensures that donors’ funds are not losing income for awards made according to donors’ wishes.
The Endowment Pool is charged with the goal of preserving the purchasing power of every endowed gift while distributing a meaningful, stable flow of support to Utah State University. To reach this goal, the investment policy for the Endowment Pool seeks to maximize long-term total returns relative to acceptable levels of investment risk.
This has many benefits for both the University and our donors. Primarily, for our donors, the University is able to maintain the value of the donor’s gift in perpetuity without it being eroded by the effects of inflation. As a result, the University is able to meet the current and future needs of the college or department for which an endowed gift is designated. Also, as the endowment grows, there is more income available to be used according to the donor’s wishes.
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Appreciation is the amount of income generated by the investment of an endowment that is reinvested in the endowment pool. These funds are separate from the corpus (see definition below) in that appreciation can be spent in a year when there are insufficient earnings for the scholarship or other purpose.
The corpus is the amount of the donor’s gift that is invested in the endowment pool. Corpus can also be referred to as the principal.
An endowed fund is established by a donor’s contribution and requires that the principal amount of the fund be held in perpetuity. Only distributed income, calculated according to the University’s spending policy, is available to be expended for the specific purpose of the endowed fund.
The Endowment Pool was established to manage and invest the University’s endowed funds. Individual endowed funds added to the pool are used to “purchase” shares of the pool. To calculate the number of shares for a new endowed fund, the University divides the endowed gift amount by the current market value per share on the gift date.
The Endowment Pool is invested in a diversified portfolio of assets, including equity securities (domestic and international), bonds (domestic and international), hedge funds, private equity securities, timber, energy, and real estate.
Utah State University has adopted a spending policy that distributes income based on calculating 4 percent of the three-year average fair market value per share of the Endowment Pool.